THE COTTAGES ON OSOYOOS LAKE INFORMATION STATEMENT. Stelkia Limited Partnership

Transcription

1 THE COTTAGES ON OSOYOOS LAKE INFORMATION STATEMENT Developer: Stelkia Limited Partnership Mailing Address: Suite Luckakuck Way Chilliwack, British Columbia V2R 5S3 Address for Service: Real Estate Agent: Gowling Lafleur Henderson LLP Burrard Street Vancouver, British Columbia V6C 2B5 Key Marketing Inc West 2 nd Avenue Vancouver, British Columbia V6J 1H3 Tel: (604) MARCH 4, 2011 Information Statement - April 14, 2011 Page 1 of 74

2 GENERAL DISCLAIMER This Information Statement is prepared by Stelkia Limited Partnership (the Developer ), and contains an overview of the development and construction of a mixed residential and recreational development (the Development ) on lands located within the Osoyoos Indian Reserve No. 1. The Development Lands, as defined herein, and construction of the improvements thereon are not subject to the British Columbia Real Estate Development Marketing Act. This is not a Disclosure Statement as the term is defined in the British Columbia Real Estate Development Marketing Act and this Information Statement will not be filed with the British Columbia Superintendent of Real Estate or any other office of the Province of British Columbia or Canada. The interest in the residential units (each a Residential Unit and collectively the Residential Units ) being offered pursuant to this Information Statement are leasehold interests, they are not fee simple title interests or interests in a strata lot. As the Residential Units are located on the Osoyoos Indian Reserve No. 1, various provincial statutes, including the British Columbia Land Title Act and the Strata Property Act, are not applicable to the Residential Units or the Development. The Development has been structured, however, so that it will function in a manner similar to a strata development, as described in Section 2.1. BUILDING PERMIT AND CONSTRUCTION FINANCING The Residential Units in the Development are being marketed before the Developer has obtained approval to construct the Development or an unconditional commitment from a lender to finance the construction of the Residential Units and other improvements on the Development. The Developer has obtained from Indian and Northern Affairs Canada ( INAC ) conceptual approval of the Development plans. The Developer will submit to INAC the engineering plans for the Development and anticipates that it will have INAC s approval to construct not later than August 30, BUYER S RIGHT OF CANCELLATION The buyer, being the sublessee of a leasehold interest in a Residential Unit, will have a time limited right to cancel the buyer s purchase agreement with the Developer. After the buyer s receipt from the Developer of an accepted purchase agreement for a leasehold interest in a Residential Unit, the buyer will have seven (7) days to deliver a notice of cancellation of the purchase agreement to the Developer. If the buyer cancels the accepted purchase agreement within the seven (7) day cancellation period, the buyer will have no liability whatsoever under the purchase agreement and any deposit paid by the buyer will be returned to the buyer without any deductions whatsoever. RESIDENTIAL UNITS TO BE CONSTRUCTED This Information Statement relates to the Residential Units that have not been constructed as of the date hereof. Information Statement - April 14, 2011 Page 2 of 74

3 THE COTTAGES ON OSOYOOS LAKE INFORMATION STATEMENT INDEX 1. THE DEVELOPER The Developer Purpose and Assets Records Office Address Directors Developer s History GENERAL DESCRIPTION General Description of the Development Permitted Use Building Construction Phasing LEASE AGREEMENT The Head Leases and Subleases Occupancy Restrictions Termination Provisions Prepayment Cost Repayment Provisions Registration Assignment and Subleasing Occupancy Charges Taxes Management Residential Tenancy Act Common Areas and Common Facilities Furnishings and Equipment Developer s Rights Parking Utilities and Services Insurance TITLE AND LEGAL MATTERS Legal Description Ownership Existing Encumbrances and Legal Notations Proposed Encumbrances i- Information Statement - April 14, 2011 Page 3 of 74

4 4.5 Outstanding or Contingent Litigation or Liabilities Environmental Matters CONSTRUCTION AND WARRANTIES Construction Dates Warranties Previously Occupied Building APPROVALS AND FINANCES Development Approval Construction Financing MISCELLANEOUS Deposits Purchase Agreement Developer s Commitments Other Material Facts ii- Information Statement - April 14, 2011 Page 4 of 74

5 1. The Developer 1.1 The Developer Stelkia Limited Partnership is a limited partnership that was formed on November 24, 2010 pursuant to the British Columbia Partnership Act under registration number Stelkia Homes Ltd. is the managing general partner (the Managing Partner ) of the Developer. The Managing Partner is a British Columbia company that was incorporated on October 7, 2010 pursuant to the British Columbia Business Corporations Act under incorporation number BC Stelkia Holdings Ltd. ( Stelkia Holdings ) is a general partner of the Developer. Stelkia Holdings is a British Columbia company that was incorporated on October 7, 2010 pursuant to the British Columbia Business Corporations Act under incorporation number BC Yacheen Holdings Inc. ( Yacheen ) is a general partner of the Developer. Yacheen is a British Columbia company that was incorporated on October 7, 2010 pursuant to the British Columbia Business Corporations Act under incorporation number BC (The Managing Partner, Stelkia Holdings and Yacheen are, collectively, the General Partners ). 1.2 Purpose and Assets The Developer was formed for the purposes of developing the Development described herein and has no other assets other than those related to the Development Lands. 1.3 Records Office Address The Developer s records office address is: 1.4 Directors Burrard Street Vancouver British Columbia V6C 2B5 The directors of the Managing Partner are: Name: Eric Van Maren Address: Suite Luckakuck Way Chilliwack, British Columbia V2R 5S3 Phone: (604) ericv@vanmarengroup.com Information Statement - April 14, 2011 Page 5 of 74

6 - 2 - Name: Bernie Van Maren Address: Suite Luckakuck Way Chilliwack, British Columbia V2R 5S3 The directors of Stelkia Holdings are: Name: Eric Van Maren Address: Suite Luckakuck Way Chilliwack, British Columbia V2R 5S3 Name: Bernie Van Maren Address: Suite Luckakuck Way Chilliwack, British Columbia V2R 5S3 The sole director of Yacheen is: Name: Address: Rodney Samuel Cook ( Rod Cook ) Dolphin Avenue Kelowna, British Columbia V1Y 9S4 1.5 Developer s History (1) The Developer is a limited partnership, the Managing Partner and the general partner Stelkia Holdings of which are controlled by Bernie Van Maren and Eric Van Maren (together the Van Marens ), long-time residents of Chilliwack, and Rod Cook, a long-time resident of Kelowna, controls the general partner, Yacheen. The Van Marens are the principals of the Van Maren Group of Companies, which has developed multi-family residential projects throughout British Columbia since Recent projects include Halcyon Meadows (224 homes located on the Tzeachten Indian Reserve) and Aria Apartments (175 homes located on the Westbank Indian Reserve). The Van Marens are currently developing a 61-home community on the Skowkale Reserve in Chilliwack, British Columbia, a 110-acre industrial park in Maple Ridge, British Columbia and are also involved in a number of large residential subdivisions in Alberta and Ontario (see Rod Cook is senior partner with Kent-Macpherson, one of the province s largest real estate appraisal and consulting firms, based in Kelowna. Rod Cook has 30 years experience in the real estate appraisal, consulting and development business, specializing in developments on First Nations Lands. (2) To the best of the Developer s knowledge, none of the Developer, the General Partners, the Van Marens or Rod Cook, within ten (10) years from the date of this Information Information Statement - April 14, 2011 Page 6 of 74

7 - 3 - Statement, has been subject to any penalties or sanctions imposed by a court or regulatory authority relating to the sale, lease, promotion or management of real estate or securities, or to lending money secured by a mortgage of land, or to arranging, administering or dealing in mortgages of land, or to theft or fraud. (3) To the best of the Developer s knowledge, none of the Developer, the General Partners, the Van Marens or Rod Cook, within five (5) years from the date of this Information Statement, has been declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or has been subject to or instituted any proceedings, arrangement or compromises with creditors or had a receiver, receiver manager or trustee appointed to hold the assets of such persons. (4) To the best of the Developer s knowledge, none of the Developer, the General Partners, the Van Marens or Rod Cook, within five (5) years from the date of this Information Statement, has been a director, officer or principal holder of any other developer that, while the person was acting in that capacity, that other developer: (a) was subject to any penalties or sanctions imposed by a court or regulatory authority relating to the sale, lease, promotion, or management of real estate or securities, or to lending money secured by a mortgage of land, or to arranging, administering or dealing in mortgages of land, or to theft or fraud; or was declared bankrupt or made a voluntary assignment in bankruptcy, made a proposal under any legislation relating to bankruptcy or insolvency or been subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets. 2. General Description 2.1 General Description of the Development (a) The Development The conceptual plan for the Development is for the construction of approximately 284 single family Residential Units on the Development Lands located near Osoyoos Lake, British Columbia. This Information Statement relates to the marketing of all of the proposed Residential Units provided that the proposed Unit Entitlement, Interim Budget and Maintenance Fee schedules relate to the first phase only. As further phases are marketed, these schedules will be revised. The Development may include all, or any part of, the following uses: (i) Residential Units and Common Areas and Common Facilities (as defined in the Subleases) for residential, recreational and ancillary commercial purposes; (ii) private and commercial recreational vehicle, campground and manufactured home sites; Information Statement - April 14, 2011 Page 7 of 74

8 - 4 - (iii) (iv) (v) buildings or structures for tourist accommodation, restaurant, licensed establishment, tourist retail store, mini-storage units for use by owners and occupiers of the Residential Units and storage of recreational vehicles including campers, boats and all-terrain vehicles; boat slips and related facilities (subject to obtaining required approvals by governmental authorities); and other ancillary buildings, improvements, facilities, structures and services associated with a mixed residential and recreational development, and all ancillary purposes ordinarily associated with such a mixed use development, (each a Use and collectively, the Uses ). The Developer does not represent or warrant that all of the potential Uses will form part of the Development. Presently, the intention is to construct only Residential Units, but other Uses may occur. Buyers may contact the Developer or its real estate broker for details of the current scope of the planned Uses for the Development. The Development may take place in several phases as more particularly described in Section 2.4. The Developer may alter the conceptual plans, and numbers and types of Residential Units and the Uses described above, based on market conditions. The Residential Units will be wood framed construction, with the average size of the Residential Units anticipated to be 1,500 square feet. While it is anticipated that many Residential Units will be used on a seasonal or recreational basis, full-time residency is a permitted Use. The Common Areas and Common Facilities of the Development, as more particularly described in Section 3.12, will include all portions of the Development other than the Residential Units and those units subleased for commercial purposes (the Commercial Units and together with the Residential Units, the Development Units ). The Commercial Units, if constructed, will be used for purposes ancillary to the residential and recreational Uses of the Development. The Development Lands, as more particularly described in Section 4.1, presently comprise of two lots briefly described as Lot and Lot 39-2 situate on Federal Crown land reserved for the Band. Location of the Development The Development is located on the Osoyoos Indian Reserve Number 1, adjacent to Osoyoos Lake in British Columbia. The civic address of the Development is 2450 Inkaneep Road, Oliver, British Columbia V0H 1T0. Access to the Development will be by way of a private road (the Access Road ) which connects to Inkaneep Road. The Access Road will be governed by a permit for the term of the Head Leases in favour of the Homeowners Corporation, see details in Section 3.16(f). Information Statement - April 14, 2011 Page 8 of 74

9 - 5 - (c) Preliminary Plans The proposed layout of the Development and location of the Residential Units, the Common Areas and Common Facilities and the proposed improvements relating to the Commercial Units are set out in the preliminary plans (the Preliminary Plans ) attached hereto as Exhibit A. The Preliminary Plans are based on pre-construction architectural and design drawings and the final layout and location of the constructed Residential Units and Common Areas and Common Facilities, the Commercial Units and other aspects of the Development may vary from the layout, location and design shown in the Preliminary Plans. The Developer reserves the right to make variations and modifications to the Preliminary Plans, provided such variations and modifications do not materially change the size or location of Residential Units being marketed under this Information Statement. Each buyer will select a floor plan from those available for the lot in question. Sample floor plans may be viewed on the Development s website at The Developer reserves the right to make modifications to available floor plans. The Unit entitlement for each Residential Unit is set out on Exhibit B. (d) Legal Form of the Development The Developer, acting through its Managing Partner, has leased the Development Lands from Her Majesty the Queen in Right of Canada, as represented by the Minister of Indian Affairs and Northern Development (the Federal Crown ) on behalf of Jane Stelkia ( Stelkia ) in respect of Lot and Modesta Betterton ( Betterton ) in respect of Lot 39-2, for a term of 99 years pursuant to a separate prepaid head lease for the two lots, as more particularly described in Section 3.1(a). The head leases for each of Lot (the Lot Head Lease ) and Lot 39-2 (the Lot 39-2 Head Lease, and together with the Lot Head Lease, the Head Leases ) each commenced on December 1, 2010 and expire on November 30, The Head Leases are registered in the Indian Lands Registry (the Registry ) in Ottawa, Ontario under registration numbers for the Lot Head Lease and for the Lot 39-2 Head Lease. A buyer of a Residential Unit in the Development will receive a sublease from the Developer which gives the buyer, as sublessee, the right to occupy the Residential Unit and the lot associated with the Sublease. The use by a buyer of a Residential Unit and the Common Areas and Common Facilities will be subject to the terms and conditions of the Subleases. The Developer is offering buyers the option of entering into a prepaid rent sublease (the Prepaid Sublease ) or a monthly rent sublease (the Monthly Sublease, which together with the Prepaid Sublease are the Subleases ). Copies are available from the Developer or its real estate agent. The Developer reserves the right to make changes to the form of the Subleases as may be reasonably required. Information Statement - April 14, 2011 Page 9 of 74

10 - 6 - When a buyer acquires a Residential Unit, the buyer will become a member (shareholder) in the homeowners corporation for the Development. The Stelkia Homeowners Corporation (the Homeowners Corporation ) is a company incorporated pursuant to the British Columbia Business Corporations Act and will be responsible for management and maintenance of the Common Areas and Common Facilities, the administration and enforcement of certain terms of the Subleases and the rules (the Rules ) established by the directors of the Homeowners Corporation, as more particularly described in Section 3.1(c). The only members of the Homeowners Corporation will be owners of Residential Units, the Developer and any mortgagee of the Developer. Ownership of a Residential Unit will entitle the owners of that Residential Unit to one (1) vote at meetings of the Homeowners Corporation. No later than the time that all the Residential Units in the Development are transferred to buyers the Developer will issue a Sublease of Common Areas and Common Facilities to the Homeowners Corporation for nominal consideration (the Sublease for the Clubhouse may be issued to the Homeowners Corporation before the Sublease of other Common Areas and Common Facilities). Pursuant to this Sublease the Homeowners Corporation will control and manage the Common Areas and Common Facilities. (e) Development The current master plan for the Development contemplates the construction of approximately 284 homes. The Developer reserves the right to increase or decrease the total number of Residential Units in the Development. The Development will include a clubhouse (the Clubhouse ) of approximately 7,000 square feet within which the Developer intends to designate 900 square feet of area for the use as a caretaker suite. The Developer reserves the right to use the caretaker suite for its sales and marketing staff for as long as it has Development Units available for sale in the Development. The Developer also has the right to use the Clubhouse lobby, tuck-shop, club room, kitchen and storage room as well as four adjacent parking spaces for as long as it has Development Units available in the Development. The Developer will not pay for the use of this space. The Developer reserves the right to build additional amenities on the Common Area of the Development. The Developer intends to construct the Clubhouse as part of the first phase of the Development. 2.2 Permitted Use The Residential Units are intended for residential use only. No Residential Unit in the Development may be used for commercial or other purposes that are not ancillary to residential purposes. Ancillary uses to the Residential Units include home office use. Residential Units may be rented, for periods of at least five consecutive days. Use of the Residential Units is subject to the terms of the applicable Head Lease, the Sublease, the bylaws and resolutions of the Band and the Rules. Information Statement - April 14, 2011 Page 10 of 74

11 Building Construction The Developer is responsible for the construction of the Residential Units and the Common Areas and Common Facilities. The Developer will retain a licensed home inspector to inspect the Residential Units. Common Areas and Common Facilities will be designed and inspected by engineers or an architect licensed in British Columbia. Such Common Facilities will include the Clubhouse, site services, sewage and water treatment facilities. All buildings will be designed in accordance with the latest edition of the British Columbia Building Code. 2.4 Phasing The Developer intends to develop the Development in phases. As each phase is sold the associated roads and landscaping will be completed (subject to seasonal limitations). The completion of the entire Development is dependent on market conditions. 3. Lease Agreement 3.1 The Head Leases and Subleases (a) Head Leases The following is a description of the material terms in the Head Leases. The Lessor under the Head Leases is the Federal Crown and the Lessee is the Developer. The Homeowners Corporation is a party to the Head Leases, Stelkia is a party to the Lot Head Lease and Betterton is a party to the Lot 39-2 Head Lease. Both Stelkia and Betterton are the holders of Certificates of Possession for Lot and Lot 39-2, and have authorized the granting of the Head Leases. The material terms of the Head Leases include the following: (i) (ii) (iii) the term of the Head Leases is 99 years, having commenced on December 1, 2010 and expiring on November 30, 2109; the Prepaid Rent under the Lot Head Lease has been fully prepaid by the Developer to the Federal Crown. Under the terms of an agreement between the Developer and Stelkia (the Stelkia Agreement ), the Developer agreed to pay to Stelkia a further amount (the Stelkia Payment ) on or before September 22, 2013 (the Stelkia Payment Date ). The Developer will not issue a Sublease for a Development Unit until it has made the Stelkia Payment; the Basic Rent under the Lot 39-2 Head Lease is $350,000, of which the Developer has paid to the Federal Crown the sum of $30,000. The balance of the Basic Rent (the Lot 39-2 Payment ) is due and owing to the Federal Crown on or before September 25, 2013 (the Betterton Payment Date ). Under the terms of an agreement between the Developer and Betterton (the Betterton Agreement ) the Developer agreed to pay to the Federal Crown an additional sum (the Betterton Information Statement - April 14, 2011 Page 11 of 74

12 - 8 - Payment ) as prepaid rent for Lot 16, as more particularly described in Section 4.1, on or before the Betterton Payment Date. All Basic Rent owing under the Lot 39-2 Head Lease will be fully prepaid before the Developer issues a Sublease for a Development Unit; (iv) (v) (vi) (vii) the Developer and each of Stelkia and Betterton (together the Landholders ) have certain rights to terminate the respective Head Leases if the Stelkia Payment is not made before the Stelkia Payment Date or the Lot 16 and Betterton Payment is not made before the Betterton Payment Date, as more particularly described in Section 3.3. The Developer will not grant a Sublease for a Development Unit until it has fully paid the Stelkia Payment, the Lot 39-2 Payment and the Betterton Payment; the lessee under the Head Leases, which is currently the Developer, has certain ongoing obligations under the Head Leases, including the obligation to pay all ongoing third party expenses such as taxes and utilities, the obligation to maintain, repair, replace, reconstruct and restore the premises, the obligation to insure and the obligation to ensure compliance by all subtenants with the terms of the Head Leases. Such obligations will be the Homeowners Corporation, in a similar manner as a strata corporation would have such obligations; the Head Leases are registered in the Indian Lands Registry in Ottawa as described above in Section 2.1. The Head Leases will not be registered under the British Columbia Land Title system; and each Head Lease includes a mechanism whereby it can be severed and assigned to the Homeowners Corporation in connection with Subleases already issued, if there is a default by the Developer. This mechanism is a protection to buyers who have been issued a Sublease, as more particularly described in Section. Sublease The Developer will create individual subleases for each Residential Unit in the Development. The buyer at the time of entering into a Purchase Agreement for a Residential Unit will have the choice of entering into a Prepaid Sublease or a Monthly Sublease. The material terms of each form of Sublease include the following: (i) (ii) the term of the Subleases will end one day prior to the termination of the applicable Head Lease subject to prior termination in the event of default; each occupant is obligated to maintain, repair and replace his or her Residential Unit and pay his or her proportionate share of certain ongoing expenses relating to the Common Areas and Common Facilities, during the term of the Sublease (in the same fashion as an owner of a strata lot Information Statement - April 14, 2011 Page 12 of 74

13 - 9 - would pay), including costs of insurance and costs of repairs, maintenance and upkeep; (iii) (iv) (v) (vi) (vii) the assignment (sale) or mortgaging of a Sublease is subject to the prior written consent of the Federal Crown, which is a statutory requirement granted in most instances as a matter of course upon presentation of standard documentation for registration in the Registry, and there must be no default under the Sublease at the time of an assignment; the Sublease will be registered in the Indian Lands Registry. The Sublease will not be registered under the British Columbia Land Title system; the Monthly Sublease will provide that the Sublessee must pay prepaid rent and monthly rent, as more particularly described in the Monthly Sublease purchase agreement. The Developer has been advised that harmonized sales tax ( HST ) is not payable on rent. If it is determined that the Prepaid Rent under the Monthly Sublease is subject to HST, the Developer will pay the HST attributable to the Prepaid Rent provided that the Sublessee promptly executes and returns, at no cost to the Developer, any and all documents required by the Developer, to assign and transfer to the Developer, any New Housing Rebate that might apply in respect of the sublease of the Residential Unit. If it is determined that the Monthly Rent under the Monthly Sublease is subject to HST, the Sublessee will pay the HST attributable to the Monthly Rent; the Prepaid Sublease will provide that the Sublessee prepay the full amount of the rent for each year of the Term on the Closing Date. The Developer has been advised that HST is not payable on rent. If it is determined that the rent is subject to HST, the Developer will pay the HST provided that the Sublessee promptly executes and returns, at no cost to the Developer, any and all documents required by the Developer, to assign and transfer to the Developer, any New Housing Rebate that might apply in respect of the sublease of the Residential Unit; and the Sublease will provide that the sublessor may install on the side of some homes an irrigation control box, which will be powered by electricity supplied and paid for by the sublessee of a Residential Unit. The Subleases will further provide that the Developer and the Homeowners Corporation or any employee, agent or contractor of the Developer or the Homeowners Corporation may enter upon a sublessee s lot, at all reasonable times, for the purposes of installing, inspecting, maintaining, repairing and replacing the irrigation control box, irrigation pipes and systems located on or under a buyer s lot and the appurtenant facilities connected thereto. Information Statement - April 14, 2011 Page 13 of 74

14 (c) Homeowners Corporation The Development Lands are Federal Crown lands which are not registered in the British Columbia Land Title System and the Strata Property Act of British Columbia does not apply to the Development Lands. As a result, the following steps have been taken to structure the Development in a manner similar to a bare land strata: (i) (ii) (iii) (iv) (v) the Homeowners Corporation is a company incorporated under the Business Corporations Act (British Columbia). Such legislation, or any successor legislation, and the Articles of the Homeowners Corporation will govern the operation of the Homeowners Corporation and the rights and obligations of its shareholders, officers and directors. The Articles of the Homeowners Corporation require that certain significant decisions be approved by not less than seventy-five (75%) percent of the votes cast at a meeting. The Homeowners Corporation will acquire a sublease of the Common Areas and Common Facilities; the Homeowners Corporation will perform similar functions to those performed by a strata corporation under the Strata Property Act of British Columbia. In particular, the Homeowners Corporation (which will function through its board of directors) will be responsible for maintaining the Common Areas and Common Facilities, placing insurance on the Common Areas and Common Facilities, establishing budgets, collecting maintenance and operating fees and enforcing certain provision of the Subleases and Rules relating to the Project; each holder of a Sublease will be a shareholder of the Homeowners Corporation. The only shareholders of the Homeowners Corporation will be the Developer, the holders of the Subleases and any mortgagee of the Developer; upon the assignment of a Sublease the assigning party ceases to be a shareholder of the Homeowners Corporation, and the party acquiring the Sublease will become a shareholder; and the Homeowners Corporation may enter into a management contract for management services. The Developer will transfer control of the Homeowners Corporation on the Developer s disposition of the last unit of the Development. 3.2 Occupancy Restrictions The Residential Units may only be occupied for residential purposes, which includes home office uses and the right to rent the Residential Units for periods not less than five (5) consecutive days. Information Statement - April 14, 2011 Page 14 of 74

15 The environmental report for the Development recommended prohibitions on free roaming cats and dogs on the Development, as a means of minimizing interference with birds and other wildlife. The Subleases will contain such prohibitions. 3.3 Termination Provisions (a) The Lot Head Lease The termination provisions under the Lot Head Lease are set out in Article 20. Article 20 The termination provisions in Article 20 of the Lot Head Lease relate to defaults of the Lessee under the Lot Head Lease. If the Lessee is in default under the Lot Head Lease, the Lessee, any mortgagee of the Lessee and the Homeowners Corporation will be given written notice of the default and the notice will specify the particulars of the default. Upon receipt of a default notice, the Lessee, any mortgagee of the Lessee or the Homeowners Corporation will have 30 days after the notice is delivered to cure the default or if such default is not reasonably capable of being cured in 30 days such longer time as is reasonably required to cure the default. If the curing party fails to proceed to cure the default with all due diligence the Federal Crown may by notice, subject to the rights of the Homeowners Corporation described next, declare the term of the Lot Head Lease ended. There is a mechanism under the Head Leases to protect the interests of buyers if the Federal Crown is entitled to terminate the Head Lease. Specifically, Section of the Lot Head Lease provides that if the Federal Crown is entitled to terminate the Lot Head Lease and one or more Subleases of the Development Lands (including by way of a mortgage granted by the Lessee to a mortgagee) are registered in the Registry, then the Federal Crown will not declare the term of the Lot Head Lease and the interest of the Lessee in the Development Lands charged by such Subleases terminated and the interest of the Lessee under the Lot Head Lease will be assigned to the Homeowners Corporation pursuant to the mechanism set out in Subsection of the Lot Head Lease. The Lot 39-2 Head Lease The termination provisions are identical to those in the Lot Head Lease. (c) The Subleases The termination provisions are set out in Article 21 of the Subleases. If the Sublessee of a Residential Unit is in default under the Sublease the Sublessee will be given written notice of the default and the notice will specify the particulars of the default. Upon receipt of a default notice, the Sublessee will have: Information Statement - April 14, 2011 Page 15 of 74

16 (i) (ii) 25 days from receipt of written notice from the sublessor to cure a default which constitutes a default under the terms and conditions of the applicable Head Lease; or if the default is with respect to a default which does not constitute a default under the applicable Head Lease, the Sublessee will have 90 days from receipt of written notice from the sublessor to cure such default, 3.4 Prepayment Cost following which the sublessor shall have the right, subject to the rights of the Sublessee s mortgagee to cure such default under Section 21.5 of the Subleases, to re-enter and re-take possession of the Residential Unit and terminate the Sublease. The purchase price agreed to by the Developer and Sublessee in the Purchase Agreement will be equal to the Prepaid Rent owing under the Prepaid Sublease and the Monthly Sublease for the entire term of the Prepaid Sublease. Under the Monthly Sublease, a monthly rent is payable in addition to the Prepaid Rent. Both the Prepaid Sublease and Monthly Sublease also require payment of Additional Rent. This Additional Rent is similar to a monthly strata fee and will be collected by the Homeowners Corporation to cover its costs maintaining, repairing and replacing the Common Areas and Common Facilities, together with a contingency reserve. 3.5 Repayment Provisions No portion of the Rent under the Sublease will be repaid to the Sublessee under any circumstances. 3.6 Registration Each Sublease, once signed by the Developer and the buyer and consented to by the Federal Crown, will be submitted and registered in the Indian Lands Registry when the purchase of the Residential Unit closes. The Sublease cannot be registered in the British Columbia Land Title Office. 3.7 Assignment and Subleasing (a) Assignment (Transfer to a Purchaser) A Sublessee of a Residential Unit may assign (sell) his or her interest under the Sublease by assignment to a third party (the Purchaser ) subject to the consent of the Federal Crown, which in the ordinary course is regularly granted, and the Sublessor. Consent of the Federal Crown is subject to various conditions which include, but are not limited to, the Sublessee having paid all amounts due to the sublessor under the Sublease and the Purchaser signing the Sublessor s standard form Information Statement - April 14, 2011 Page 16 of 74

17 assumption agreement in favour of the sublessor with respect to its obligations under the Sublease. The assignment of a Sublease interest is, as at the date of this Information Statement not subject to the provincial property transfer tax. An administration fee equal to one (1%) percent of the greater of the selling price for the assignment of Sublease or the most recent value of the Residential Unit is payable to the Sublessor as a condition of the Assignment. Subleasing (Renting of the Residential Unit) 3.8 Occupancy Charges 3.9 Taxes A Sublessee of a Residential Unit may sub-sublease their Residential Unit to a residential tenant subject to the prior consent of the sublessor and the Federal Crown, which will not be unreasonably withheld. Attached as Exhibit D is the estimated operating budget for the common operating and maintenance costs of the Development and attached as Exhibit E is the estimated monthly maintenance fees for each Residential Unit in the first phase based on the Sublessee s proportionate share. The proportionate share (the Proportionate Share ) of each Residential Unit is a figure indicating its share in the Common Areas and Common Facilities and the assets of the Homeowners Corporation and by which a Sublessee's contribution to the expenses of the Homeowners Corporation is determined. The Proportionate Share for each Unit in the first phase is set out in Schedule B, or as otherwise amended from time to time by the sublessor. Pursuant to the Sublease, the owner(s) of each Residential Unit will be required to contribute their Proportionate Share of the common expenses based upon their Proportionate Share. This amount is payable as Additional Rent under the Sublease. The estimated operating budget and estimated maintenance fees are based on current projections for the first phase and the final operating budget and maintenance fees may vary due to unanticipated increases in the costs of services and/or utilities. Each Sublessee of a Residential Unit is responsible for paying property taxes to the Band and making an application, if applicable, for a home owner s grant. The Band has enacted taxation and assessment laws as authorized by the Indian Act, which has been approved by the Minister of Indian Affairs and Northern Development. Property taxes will be collected by the Band. The Sublease requires each Sublessee to abide by the Band s laws. At present, the tax rate charged by the Band is equal to the rate charged by the Town of Oliver. Property assessments are currently provided by the B.C. Assessment Authority. No provincial property transfer tax is payable with respect to the purchase of a Residential Unit and the registration of the Sublease in the Registry or upon the subsequent sale of a Residential Unit and assignment of a Sublease by a Sublessee to a buyer. Information Statement - April 14, 2011 Page 17 of 74

18 Management The Homeowners Corporation will be responsible for the management of the Development, including the enforcement of certain terms of the Subleases and the Rules. Each Sublessee of a Residential Unit will be entitled to be a shareholder of the Homeowners Corporation. A Sublessee of a Residential Unit will be entitled to one (1) vote at meetings of the Homeowners Corporation, including the annual general meeting where directors are appointed and the annual budget is approved. If there is more than one (1) owner of the Residential Unit, only one (1) of the owners will be entitled to vote at meetings of the Homeowners Corporation Residential Tenancy Act The Residential Tenancy Act (British Columbia) does not apply to the Sublease of Residential Units within the Development. Individual buyers who lease their Residential Unit may be bound by certain provisions of the Residential Tenancy Act, and should consult a lawyer if they have any questions Common Areas and Common Facilities The Common Areas and Common Facilities of the Development are defined in the Subleases and generally consist of roads, parking areas, garden areas, boulevards, utilities outside of Residential Units, common areas of buildings, garbage enclosures, the Clubhouse, water reservoir, utility storage areas and sewer and water treatment facilities. All Common Areas and Common Facilities within the Development are available for the use and enjoyment of all owners and occupants of the Residential Units and their invitees provided that the Developer may designate limited common areas and common facilities for the exclusive use of a Sublessee or group of Sublessees Furnishings and Equipment Each Residential Unit will include a 30 fridge, 30 electric range, 30 over the range microwave, 24 dishwasher, front loading stackable washer and dryer and one inch white aluminum window blinds Developer s Rights The Developer may rent any Residential Units in the Development that the Developer does not sublease to buyers. The Developer may retain one or more Residential Units for use as display suites as part of the Developer s marketing activities in the Development, together with those areas described in Section 2.1(e) above. While Marketing and sales activities are under way, the Developer shall have unrestricted access to the Development. Information Statement - April 14, 2011 Page 18 of 74

19 Parking Parking for the Residential Units will be provided for in areas of the Development designated by the Developer. The Developer anticipates the following parking arrangements for the following classes of Residential Units: (a) (c) Meadow Homes: one surface parking space located in a designated common parking area near such homes; Lakeside Homes: two surface parking spaces located in a designated common parking area near such homes; and Hillside Homes: one or two enclosed parking spaces in the garage attached to such homes. In addition, there will be approximately 70 visitor parking spaces distributed throughout the Development. The Developer, in its sole discretion, will determine the location, size and allocation of parking stalls. Sublessees may only park vehicles on their designated space, and must abide by all Rules regarding parking of vehicles and trailers Utilities and Services The Development will be provided with the following services: (a) (c) (d) Water: The Developer intends to construct a private water supply and distribution system that will draw potable water from two wells on the Development Lands. The Developer has applied to draw water from Osoyoos Lake for landscape irrigation purposes. The system will include a water reservoir (the Water Reservoir ) that will be located outside of the Development Lands. The Developer has applied for a permit under section 28(2) of the Indian Act (Canada) granting to the Homeowners Corporation the right to locate, maintain and access the Water Reservoir on that portion of the Band s land identified as Permit Area C on the plan attached to the Band Council Resolution approving the Water Permit, a copy of which is at Exhibit G. The cost of operating, maintaining and replacing this facility will be paid by the Homeowners Corporation; Electricity: FortisBC will provide electricity to the Development; Sewerage: The Development will construct a private sewage treatment facility. The cost of operating and maintaining this facility will be paid by the Homeowners Corporation; Natural gas: The Developer does not anticipate that the Development will be serviced by natural gas; Information Statement - April 14, 2011 Page 19 of 74

20 (e) (f) (g) Telephone: Telus, Eastlink or Shaw will provide telephone, internet and cable services to the Development; Access: Access to the Development and homes thereon will be by way of a private road (the Access Road ), which will connect to Inkaneep Road. The Access Road does not form part of the Development Lands. The Developer has applied for a Permit under section 28(2) of the Indian Act (Canada) (the Access Permit ) granting to the lessees, sublessees and lawful occupants of the Development Lands and invitees the right to use the Access Road for the purposes of access to and from the Development Lands. The Access Permit will be for the benefit of the Homeowners Corporation; and Fire Protection: Fire protection will be provided by the Town of Osoyoos Insurance (a) (c) The Developer will obtain course of construction insurance at least equal to the costs of improvements and general liability insurance on the Development Lands in the amount of $5,000,000. The Developer will cause the Homeowners Corporation to arrange insurance coverage to replace the insurance coverage set out above with an all risk, all property insurance for full replacement value of Common Areas and Common Facilities, including general liability of at least $2,000,000. The Sublessee will be responsible for insuring his or her Residential Unit, with: (i) (ii) an All Risks policy covering the buildings including costs of excavations and foundations and improvements on the Residential Unit as would be insured against by a prudent owner, including coverage for earthquake and such other perils as the Federal Government may reasonably require to be insured against, in an amount not less than the Replacement Cost, as defined in the Subleases, of such buildings and replacements; and a comprehensive personal general liability policy or Commercial General Liability Policy against claims for personal injury, sickness, illness, disease or disability, death or property damage or loss (including liability coverage for pollution, to the extent such coverage is available) arising out of the ownership, occupation, maintenance and use of the Residential Unit by the Sublessee, in an amount not less than One Million Dollars ($1,000,000.00) in respect of any one accident or occurrence, or such higher amount as the Federal Crown may require from time to time. (d) Each Sublessee will be required to obtain the insurance from a broker selected by the Homeowners Corporation. Initially, the broker is HUB International Canada West dba Hub International Barton Insurance Brokers. All insurance policies will have common expiration date. The Homeowners Corporation, with the approval Information Statement - April 14, 2011 Page 20 of 74

21 of not less than 75% of the shareholders entitled to vote at a meeting, may change the broker from time to time. The process of using one broker simplifies the administration of insurance and compliance with the insurance requirements of subleases and the Head Leases. 4. Title and Legal Matters 4.1 Legal Description The lands upon which the Development is located are situate within Osoyoos Indian Reserve IR#1 and are presently comprised of two parcels of land more particularly known and described as: Lot , in Osoyoos Indian Reserve IR #1, Province of British Columbia, as shown on Plan of Survey RSBC 2012 deposited in the Canada Lands Survey Records at Ottawa, Ontario ( Lot ); and Lot 39-2, in Osoyoos Indian Reserve IR #1, Province of British Columbia, as shown on Plan of Survey RSBC 1935 ( Lot 39-2 ), (Lot and Lot 39-2 are together the Development Lands ). Lot is approximately 28.5 hectares, and Lot 39-2 is approximately hectares. As described in Section 2.1 above, the Developer, as Lessee, holds a ninety-nine (99) year prepaid lease for each of Lot and Lot 39-2, that both commenced on December 1, 2010 and expire on November 30, The Lessor under the Head Leases is the Federal Government. In the course of its due diligence the Developer determined that the existing survey for Lot is in error, and overstates the area by approximately hectares. The Developer s surveyor is resurveying the lot. As a result a new plan will be prepared, and necessary modifications to the Lot Head Lease and legal description will be made. The Developer has taken the error into consideration in its plans for the Development, and has not included such area in the Development. 4.2 Ownership The Development Lands are held by the Federal Crown for the use and benefit of the Band. Stelkia, at the time of the execution of the Lot Head Lease, was in lawful possession of Lot as evidenced by a certificate of possession issued pursuant to subsection 20(2) of the Indian Act (Canada). Betterton at the time of the Lot 39-2 Head Lease was in lawful possession of Lot 39-2 as evidenced by a certificate of possession issued pursuant to subsection 20(2) of the Indian Act (Canada). The Developer, pursuant to the terms of the Head Leases, is the current Lessee of the Lands. Pursuant to the terms of the Head Leases, the Developer may develop and market the Development Lands for the Uses and, with the consent of the Federal Crown, sublease the Residential Units. Information Statement - April 14, 2011 Page 21 of 74

22 Existing Encumbrances and Legal Notations (a) A permit between Her Majesty and British Columbia Telephone Company, granted under Section 28(2) of the Indian Act (Canada), is registered against title to the Development Lands. The purpose of this permit is to permit the delivery of telecommunication services to the Lands. The Head Leases reserve to the Federal Crown the right to extract minerals from the Development Lands. 4.4 Proposed Encumbrances The following additional encumbrances may be registered against the title to the Development Lands: (a) (c) easements, restrictive covenants, dedications and rights-of-way and other rights or restrictions in favour of FortisBC, TELUS and other utilities and communications suppliers with respect to access to the Development Lands and the right to install, repair and maintain utility and communication infrastructure for the benefit of the Development; easements, permits, restrictive covenants, dedications and rights-of-way and other rights or restrictions in favour the Band, the Managing Partner, the Homeowners Corporation, public authorities, municipalities or any other applicable government authority in connection with the approval of the Development or the construction, use or occupation of the Development Lands or as is reasonably required for the Development; and mortgage and assignment of rents (collectively, the Construction Mortgage ) in favour of one or more than one third party lenders, securing the construction financing required by the Developer to complete the Development (see Section 6.2 Construction Financing). The Construction Mortgage will provide that the mortgagee s interest claimed under the Construction Mortgage in a Residential Unit will be discharged by the mortgagee after the Residential Unit is transferred to a Sublessee. The construction loan secured by the Construction Mortgage will be paid out post-closing from the sale proceeds the Developer receives from the sale of the leasehold interest in the Development Units. 4.5 Outstanding or Contingent Litigation or Liabilities There is no outstanding or, to the best of the Developer s knowledge, anticipated litigation or liability in respect of the Development or against the Developer or against the General Partners that may affect the Development. Information Statement - April 14, 2011 Page 22 of 74